Bills Digest no. 85 1977
Defence Force (Retirement and Death Benefits Amendments) Bill
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
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Defence Force (Retirement
and Death Benefits Amendments) Bill 1977
Date introduced: 17 February
House: House of Representatives
Purpose of Bill
This Bill provides for the automatic
annual adjustment of pensions payable under the Defence Force
Retirement Benefits Act and the Defence Force Retirement and Death
Benefits Act in accordance with increases in the Consumer Price
As a result of the recommendations of
the Joint Select Committee on Defence Forces Retirement Benefits
Legislation (The Jess Committee), which reported to Parliament in
May 1972, a fundamental change was made in the method of providing
retirement benefits for the Defence Force.
There are now two schemes:
(a) The Defence Force Retirement and Death Benefits (D.F.R.D.B.)
Scheme which came into force on 1 October 1972
. This covers new contributors, and serving members who had been
contributing to the Defence Forces Retirement Benefit (D.F.R.B.)
Fund. The latter were transferred to the new scheme.
(b) The Defence Force Retirement Benefits Fund. This was closed
to contributors from
1 October 1972, but continues to provide for the benefit
entitlements of ex-servicemen who retired before that date, or
their widows and children.
Under the D.F.R.D.B. there is a flat
rate of contribution of 5.5% of pay.
The basis of contribution under the
D.F.R.B. scheme had become very complicated. Contributions were
also on two different bases depending upon whether the serviceman
entered before or after 1959.
After closure of the D.F.R.B. scheme
in 1972 all benefit payments for both Schemes are being met by
special appropriations from consolidated revenue.
One of the important recommendations
of the Jess Committee was that pensions be adjusted annually.
Adjustments in the Past
Prior to 1972 two methods of
calculating pension increases had been used. One was based on
changes in the value of the pension unit and was applied in 1951
and 1954. The other was the notional salary method in which the
increase was related to the salary which the pensioner would be
receiving if he had retired at a later date. Adjustments on this
basis were made in 1961, 1963, 1967 and 1971.
Although increases were generous
there were long gaps. There was no certainty about them because new
legislation was required in every case.
Since 1972 the principle of annual
adjustments has been followed. Increases have been based upon
either the percentage increase in average weekly earnings or the
Main Provisions of the Bill
Automatic annual increases of
pensions under both schemes are provided for by adding Part VID
Pension Increases to the D.F.R.B. Act and Part XA Pension
Increases to the D.F.R.D.B. Act.
The formula for adjustment is the
same for each scheme. The percentage increase to apply from 1 July
in any financial year is the difference, expressed as a percentage,
between the C.P.I. for the March quarter in the financial year
preceding adjustment and the highest C.P.I. for the March quarter
since 1 July 1974. Adjustments are made only if the C.P.I. exceeds
a previous highest C.P.I. for the March quarter. Increases for
1976/77 are to be paid retrospectively from 1 July 1976.
There is a difference in the
application of this formula to the two schemes. Under D.F.R.B. it
applies to the whole of the pension currently being paid. Under
D.F.R.D.B. it applies to the amount which the pensioner would
receive if he had commuted to the maximum extent allowable.
Other amendments provided for in Part
VID of the D.F.R.B. Act and Part XA of the D.F.R.D.B. Act take care
of various circumstances and special cases and define how the basic
formula for increases is to apply. Included in these provisions
(a) Application to widows pensions. These benefit in the same
way.(b) Effect on children s pensions.(c) Proportion of increase to
apply to a new pension depending upon the number of months it has
been in force.(d) The effect of commutation.(e) Non-availability of
increases for the purpose of commutation.
Defence, Science and Technology
23 February 1977
Bills Digest Service
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